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Shipping rates soared 600% to $10,000
Jan 16, 2024|
View:196As tensions in the Red Sea heat up, more container ships are shunning the Red Sea-Suez route by detour to the Cape of Good Hope, and shippers are rushing to place orders early to mitigate the impact of longer transit times from Asia to Europe.
However, because of the delay in the return voyage, the supply of empty container equipment in the region is extremely tight, and shipping companies have limited the release of containers to high-volume "VIP contracts" or shippers willing to pay high freight rates.
Even so, there is no guarantee that all containers delivered to the terminal will be shipped by the Chinese New Year on Feb. 10, mainly because carriers will give preference to spot cargoes with higher rates and extend contracts with lower prices.
The longer the current tensions in the Red Sea last, the greater the impact on global shipping and higher shipping costs will be, reported Consumer News and Business on Tuesday. Warming conditions in the Red Sea are having a ripple effect, pushing up global shipping prices.
Container rates on some Asia-Europe routes have soared nearly 600% recently due to the Red Sea situation, the report said. At the same time, to make up for the suspension of Red Sea routes, several shipping companies are shifting their vessels on other routes to Asia-Europe and Asia-Mediterranean routes, which is pushing up shipping costs on other routes.
According to a report on the Loadstar website, the price of space on the China-Northern Europe route in February was eye-opening, at more than $10,000 per 40-foot container.
That said, Peter Sand, principal analyst at Xeneta, argues that shipbers should not rely too heavily on low freight rates in the current environment until supply-chain disruptions are resolved.
Peter Sand stressed: "Shippers are informed that long-term contract rates will no longer be fulfilled but pushed to the spot market. As a result, shippers cannot simply expect to pay lower rates, as carriers will be more inclined to give priority to contracts concluded in the spot market at higher rates."
Meanwhile, the container spot index, which reflects average short-term freight rates, continues to soar.
In recent days, Delury World Container Freight Index WCI data showed that freight rates on the Shanghai-Northern Europe route rose a further 23% to $4,406 /FEU, up 164% since December 21, while spot rates from Shanghai to the Mediterranean rose 25% to $5,213 /FEU, up 166%.
A shortage of empty containers and dry draft limits in the Panama Canal have also pushed up trans-Pacific rates, with Asia-West rates up by about a third since the end of December to about $2,800 per 40 feet. The average Asia-East US freight rate has risen 36% since December to about $4,200 per 40 feet.
Those spot rates, however, will look relatively cheap in a few weeks' time if shipping companies' rates live up to expectations. Some transpacific shipping lines will be introducing new FAK rates, effective from Jan 15. The West Coast will charge $5,000 for a 40-foot container, while East Coast and Gulf Coast ports will charge $7,000.
As tensions in the Red Sea continue to rise, Maersk has warned that the disruption to shipping in the Red Sea could last for months. Mediterranean Shipping (MSC), the world's largest liner operator, has announced an increase in freight rates for late January effective Monday. Trans-pacific freight rates could hit their highest since early 2022, industry forecasts suggest.
Mediterranean Shipping (MSC) has announced new freight rates for the second half of January. Starting Monday, the rate will rise to $5,000 on the West Coast route, $6,900 on the East Coast route and $7,300 on the Gulf of Mexico route. In addition, French shipping company CMA CGM has announced that the rate for 20-foot containers shipped to western Mediterranean ports will increase to $3,500 and 40-foot containers to $6,000 from the 15th.
According to data analyzed by Kuezer, 388 container ships with an estimated capacity of 5.13 million TEUs have been confirmed to have been rerouted due to the situation in the Red Sea as of Friday. Forty-one ships have already arrived at their first port of destination after being diverted. Project44, a logistics data analysis firm, also notes that daily ship traffic in the Suez Canal has plummeted 61% from before the Houthi attacks to an average of 5.8.
